"<p>Whether it's the news, a newspaper, or the radio, the economic news is a must. That is because economics plays a vital part in our daily life. You don't have to be a business student to understand economics, but you have to be knowledgeable enough of its fundamental principles, as a programmer, because it will shape your way of:</p> <ul> <li>Running your business</li> <li>Making decisions</li> <li>Dealing with clients</li> </ul> <p>....</p> <h1>What Is Economics?</h1> <p>In a simple broadway, economics is the science that studies how people make decisions, interact and manage their scarce resources by analyzing the forces and trends that influence the economy as a whole.</p> <p>To better understand economics, you should know its 10 principles that explain;</p> <ul> <li><strong>How People Make Decisions</strong></li> <li><strong>How People Interact</strong></li> <li><strong>How the Economy as a Whole Works</strong></li> </ul> <p> </p> <h1><strong>How People Make Decisions</strong></h1> <p> </p> <h2>Principle 1: People face trade-offs</h2> <p>In our everyday life, we face tradeoffs, which can be in the simplest actions like buying coffee or tea, or greater ones like buying a house or renting an apartment...</p> <p>Students, parents, companies: the society faces tradeoffs. One of the most known ones faced by society is the <a href="https://www.investopedia.com/terms/e/equityefficiencytradeoff.asp">Equity-Efficiency Tradeoff</a> which is a conflict the society faces between getting the most it can from its</p> <p>scarce resources (<strong>Efficiency</strong>), and distributing economic prosperity evenly among its members(<strong>Equality</strong>).</p> <p>Examples:</p> <ul> <li>A family deciding whether to buy a new car or spend that money on a vacation.</li> <li>A high-school graduate deciding whether to start working or go to college.</li> <li>A member of Congress deciding how much to spend on national parks.</li> </ul> <h2>Principle 2: The cost of something is what you give up to get it</h2> <p>Since people face trade-offs, and to make the right choice, they compare the cost with the benefits of alternatives. And that's where a very special concept rises: opportunity cost.</p> <p><strong>What Is Opportunity Cost?</strong></p> <p>Opportunity cost is whatever must be given up to obtain one</p> <p>item.</p> <p>Examples:</p> <ul> <li>A student gives up video gaming for a test they're preparing for. The opportunity cost is the fun they would have had video gaming.</li> <li>A high-school graduate chooses to work full-time instead of going to university. The opportunity cost is the knowledge they would have gained from university.</li> <li>A software developer gives up their full-time job and became a freelancer. The opportunity cost is the stability and insurance they used to have.</li> </ul> <h2>Principle 3: Rational people think at the margin</h2> <p>One of the most beneficial outcomes you get from learning economics is the way you make decisions. Economics teaches us that no matter how wondrous the big picture looks, we should focus on the details! That is why rational people take action only if <em>Marginal benefits > Marginal costs.</em></p> <p>Examples:</p> <ul> <li>A student deciding whether to study for one more hour or go to sleep. He compares the benefits of that hour alone, and that good night's sleep on his concentration.</li> <li>When a software developer considers whether to continue working for the same company for one more year or quit and start freelancing. He compares the extra knowledge he could get with the potential bigger revenue.</li> </ul> <h2>Principle 4: People respond to incentives</h2> <p>It is normal human behavior: our behavior depends on the situation that we are facing. And incentives induce us to act in certain ways.</p> <p>Examples:</p> <ul> <li>When the price of a good goes higher, we tend to consume less of it.</li> <li>When one sees a promotion for the computer they wanted to buy already, they are likely to jump on the "opportunity" and buy it instantly.</li> </ul> <p>One way incentives are created is the news! They can move a whole economy, to the best, or the worst, that's why you should be quite aware of <a href="https://indiataza.com/" target="_blank">recent news</a>!</p> <h1>How People Interact</h1> <p> </p> <h2>Principle 5: Trade can make everyone better off</h2> <p>As we all know, scarce resources vary from one country to another. For example, the oil in the middle east and the high-quality computers in Japan. Trade between a country in the middle east and Japan can make both of them better off.</p> <p>In that way, trade allows each person to specialize in the</p> <p>activities they do best and enjoy a larger diversity of goods and</p> <p>services at a lower cost.</p> <h2>Principle 6: Markets are usually a good way to organize economic activity</h2> <p>Guided by prices and self-interest, many buyers and sellers interact in markets for goods and services. And while some countries, the government still controls each detail, nowadays free markets, Adam Smith's "<a href="https://www.britannica.com/topic/invisible-hand">Invisible Hand</a>" is guiding this interaction.</p> <h2>Principle 7: Governments can sometimes improve market outcomes</h2> <p>Although markets are USUALLY a good way to organize economic activity, we still need governments. Why?</p> <ul> <li>To enforce rules and maintain institutions by enforcing property rights</li> <li>To promote efficiency</li> <li>To promote equality</li> </ul> <p>In other words, governments are markets' go-to whenever there is a failure.</p> <p> </p> <h1>How the Economy as a Whole Works</h1> <p> </p> <h2>Principle 8: A country’s standard of living depends on its ability to produce goods and services</h2> <p>As far as history is concerned, living standards have always varied from one country to another. This difference is highly dependent on the difference in productivity.</p> <h2>Principle 9: Prices rise when the government prints too much money</h2> <p>As a kid, I used to wonder why we can't just print money and live wealthily... until economics answered my question: Inflation.</p> <p>When a government prints too much money, the value of that money will fall and therefore, there will be an increase in the overall level of prices in</p> <p>the economy.</p> <p>One simpler example of this is:</p> <p>Suppose a farmer sells apples. Two customers offer to buy his goods, one can pay $10 and the second can only pay $5. The farmer would set the price that is most profitable for him: $10</p> <p>Now suppose these two customers can pay $100 and $50. Will the farmer keep the price at $10? Of course not, he will be setting it to $100. And that is how inflation happens.</p> <h2>Principle 10: Society faces a short-run trade-off between inflation and unemployment</h2> <p>When the government prints more money, and as a result of inflation, and in the short run, unemployment falls. This concept is well portrayed in the <a href="https://www.economicshelp.org/blog/1364/economics/phillips-curve-explained/">Phillips Curve</a>.</p> <p> </p> <h1>Conclusion</h1> <p>These principles help economists understand the ways individuals, firms, and governments make decisions. And they can surely help anyone make The Right decisions that can be decisive to their careers.</p>"
